Goodspeed Analysis: Taiwan’s business ties with China at stake in close election

Taiwan's business ties with China at stake in close election: Peter Goodspeed

Hundreds of thousands of Taiwanese businessmen based in China are rushing home to vote in crucial presidential and parliamentary elections Saturday that could determine Taiwan’s relations with the mainland for years to come.

Polls show the three-way presidential race between the incumbent Ma Ying-jeou of the Kuomintang (Nationalist) Party, Tsai Ing-wen, Taiwan’s first female presidential candidate and leader of the Democratic Progressive Party, and former Kuomintang rebel James Soong of the People First Party is too close to call.

The parliamentary vote is equally tight and could result in a hung parliament.

A recent study by the Centre for Strategic & International Studies (CSIS) in Washington predicts, “If President Ma is re-elected for a second term, Beijing may become impatient for faster progress toward reunification and put pressure on Ma’s government to launch talks aimed at settling political differences.”

China remains suspicious of Ms. Tsai and her party, which favours Taiwan’s formal independence from China, which claims the island as a rebellious province.

“China’s leadership is pessimistic for maintaining cross-Strait stability and progress if the DPP returns to power,” the CSIS report says.

In the past, mainland China has threatened and bullied Taiwan, demanding it recognize Beijing’s claims to rule “one China.”

In 1996, it went so far as to fire missiles into the Taiwan Strait in an attempt to warn Taiwanese voters against choosing a pro-independence president.

Those attempts have usually backfired. In recent years, Beijing sought to build relations with Taiwan through expanded economic links instead of military threats.

In the four years since Mr. Ma won a landslide victory, China has escalated trade and tourism with Taiwan, signing a free trade agreement in 2010 and negotiating 16 other agreements on everything from investment to direct flights between the two territories.

The result has been a multibillion-dollar economic boom that has tied Taiwan’s economy tightly to the mainland.

Ms. Tsai is trying exploit complaints from middle- and working-class Taiwanese that the China boom has passed them by and moved jobs to the mainland.

Rising unemployment and house prices and a growing gap between the rich and poor have taken some of the lustre off improved ties with China.

If Mr. Ma wins a second term, he has said Taiwan would “cautiously consider” signing a peace agreement with China within a decade, if Taiwanese support this in a referendum.

Ms. Tsai advocates trade talks with China, but only if the mainland recognizes Taiwan’s autonomy.

It is no secret China prefers doing business with Mr. Ma, but it has stopped short of intervening in the election, settling instead for hints a DPP victory could stall any new economic agreements.

Beijing doesn’t want to alienate the Taiwanese farmers, professionals and businesspeople it has been courting, said Douglas Paal, vice-president for studies at the Carnegie Endowment for International Peace.

“But it has a range of choices to express displeasure, running from ending the ‘diplomatic truce,’ under which China has deflected offers of diplomatic relations from Taiwan’s current partners, curtailing Taiwan’s ‘international space,’ ceasing the flow of central, provincial and local officials to Taiwan to write new deals, and suspending its acceptance of Taiwan officials in negotiating delegations to the mainland.”

Mr. Ma, who returned the Kuomintang to power in 2008 after the pro-independence DPP held the presidency for eight tumultuous years, is hoping Taiwan’s business interests will back his re-election.

About 1.5 million Taiwanese do business in China, living in costal and southern China. They could easily swing the vote in a tight race.

Taiwanese and Chinese airlines scheduled 103 extra flights in the four days before Saturday’s vote. Taiwan’s Civil Aeronautics Administration reported this week most of those flights are fully booked.

The Taiwan Business Association in China estimates 200,000 of its members will return home to vote.